July 3, 2017 / 7:08 PM / 2 months ago

Schaeuble hoping growth will end stimulus and 'crazy' negative rates

German Finance Minister Wolfgang Schaeuble attends a news conference in Berlin, Germany June 28, 2017.Hannibal Hanschke

SASBACHWALDEN, Germany (Reuters) - Euro zone growth is stronger than expected and this will enable the European Central Bank to slowly normalize its monetary policy and end a "crazy situation" of negative interest rates, German Finance Minister Wolfgang Schaeuble said on Monday.

Senior German government officials have stepped up the pressure on the ECB to scale back its monetary stimulus of bond purchases and sub-zero rates as Germany heads towards federal elections and voters complain about meagre savings returns.

Critics of the ECB's decision to buy sovereign bonds on the secondary market also argue that the programme has reduced pressure on euro zone governments to implement reforms.

Speaking to voters in his constituency in the southern state of Baden-Wuerttemberg less than three months before the Sept. 24 election, Schaeuble said that the euro zone was recovering surprisingly well and that the threat of deflation had vanished.

    "If we have more growth and if there is no threat of a deflation, then the ECB will -- it cannot do this fast because the problems in some countries in Europe are too big -- then it can slowly start to normalize monetary policy so that we can hopefully soon end this crazy situation of zero interest rates and negative interest rates," he said.

Schaeuble said that inflation in the euro zone was slowly picking up and that it was moving towards the ECB's price stability target of just under 2 percent.

This development would help ECB policymakers find a case for normalisation of their ultra-loose monetary policy, he added. "We must quickly come back to a situation in which interest rates are what they used to be," Schaeuble said.

He also pointed out that euro zone governments still had some work to do when it comes to reforms and that France and Germany next week would press ahead with proposals to strengthen bilateral cooperation and European integration.

The veteran finance minister, 74, is the longest serving lawmaker in the Bundestag lower house of parliament and he will run for another four years as parliamentarian in September.

"I'm ready to continue," Schaeuble told the crowd of some 400 voters in the tiny Black Forest town of Sasbachwalden near Offenburg. "But for this, we first need a clear majority."

Reporting by Michael Nienaber; Editing by Thomas Escritt and Catherine Evans

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